Exporting basics

Introduction

Exporting is crucial to America’s economic health. Increased exports mean business growth, and business growth means bigger profits for U.S. companies—all of which ultimately result in more jobs for American workers. Yet only a small percentage of potential exporters take advantage of these opportunities. It is critical for more U.S. businesses to think globally. Making the decision to export requires careful assessment of the advantages and disadvantages of expanding into new markets. Once the decision is made to export, developing an international marketing plan is essential. This chapter presents the advantages and disadvantages of exporting. The remaining chapters will guide you through the steps necessary to master the “trade game.”

Advantages and Disadvantages

Advantages

Exporting can help your business:

• Enhance domestic competitiveness
• Increase sales and profits
• Gain global market share
• Reduce dependence on existing markets
• Exploit corporate technology and know-how
• Extend the sales potential of existing products
• Stabilize seasonal market fluctuations
• Enhance potential for corporate expansion
• Sell excess production capacity* Gain information about foreign competition

Disadvantages

But your business may be required to:

• Subordinate short-term profits to long-term gains
• Hire staff to launch the export expansion
• Modify your product or packaging
• Develop new promotional material
• Incur added administrative costs
• Dedicate personnel for traveling
• Wait longer for payments
• Apply for additional financing
• Obtain special export licenses

International Marketing Plan Workbook

The U.S. Small Business Administration suggests completing their International Marketing Plan workbook (download it here). The purpose of the International Marketing Plan workbook is to prepare your business to enter the international marketplace. Ask yourself: Should I expand my company through exporting? Do I have any products or services* I can export? This workbook will lead you step-by-step through the process of exporting your product to an international market.

E-Commerce

E-commerce has dramatically changed the business landscape and will continue to do so in ways that cannot be predicted. E-commerce offers major advantages to the small business exporter. These include quick and easy access to tremendous amounts of information, and the ability to sell goods and services virtually anywhere in the world.One can gather and review significant amounts of information in a fraction of the time it took before the Internet—the vehicle responsible for e-commerce—was widely available. In addition, it is no longer essential for the buyer, seller and distributor to be in the same geographic location.

Identifying International Markets

Federal Government Resources

• U.S. Export Assistance Centers (USEACs)
• The U.S. Small Business Administration
• The U.S. Small Business Administration
• The United States Export-Import Bank
• The United States Department of Agriculture

Non-Federal Resources

• State Economic Development Offices
• Foreign Embassy Commercial Sections
• Exporters’ Associations
• Trade Associations

How to Gather Foreign Market Research

Now that you know where to begin your research, the next step is to identify the most profitable foreign markets for your products or services. You will need to:

1. Classify your product by the HS-Code/Schedule B number
2. Find countries with the best-suited markets for your product
3. Determine which foreign markets will be the easiest to penetrate
4. Define and narrow down those export markets you intend to pursue
5. Talk to your U.S. customers or other companies who are doing business internationally
6. . Research export efforts of U.S. competitors

Foreign Market Entry

You have many options for market entry strategies. The list includes direct and indirect exporting, joint ventures, strategic alliances, acquisitions of foreign companies through direct investment or licensing technology abroad. The benefits and risks associated with each method are contingent on many factors, including the type of product or service you produce, the need for product or service support, and the foreign economic, political, business and cultural environment you are seeking to penetrate. The best strategy will depend on your firm’s level of resources and commitment, and the degree of risk you are willing to incur.

You have many options for market entry strategies. The list includes direct and indirect exporting, joint ventures, strategic alliances, acquisitions of foreign companies through direct investment or licensing technology abroad. The benefits and risks associated with each method are contingent on many factors, including the type of product or service you produce, the need for product or service support, and the foreign economic, political, business and cultural environment you are seeking to penetrate. The best strategy will depend on your firm’s level of resources and commitment, and the degree of risk you are willing to incur.

The Export Transaction

If you have decided to proceed into direct exporting, it is now time to assemble a resource library and a team to assist you in export development leading to sales. The government agency designated to assist businesses with exporting and international trade is the Department of Commerce. Through its website Export.gov, the department offers a wide range of information and resources including a [list of frequently asked questions on exporting basics.

Your export team—aside from in-house staff—should include an international attorney, a freight forwarder, a banker and an advisor from the USEAC, a local SCORE chapter, a local Small Business Development Center or a mentoring export company. You will need all of them to get your product ready, develop pricing, respond to inquiries, prepare quotations, negotiate sales, prepare shipping documents, and select the best form of payment.

Export Financing

In the United States, small businesses typically turn to their local banks for working capital financing. However, most smaller banks do not retain staff with expertise in international trade. This is not to say, however, that such help is unavailable—only that small businesses must be persistent and tenacious in their efforts to find it. For example, if your bank’s loan officer will not work with his or her bank’s international staff (or the bank is unwilling to work with a correspondent), you should consider establishing a second banking relationship or, if necessary, moving all your accounts to a more aggressive lender with international banking expertise. So do not be afraid to shop around.

Given the difficulty most small businesses encounter when looking for export financing, it is imperative that any financial arrangements be made well in advance. To find a lender willing to consider your request, you must ensure that the purpose of the loan makes sense for the business, that the request is for a reasonable amount, and that you can demonstrate clearly how the loan will be repaid. Prospective borrowers also should understand some key distinctions before beginning discussions with a lender.

Transporting Goods Internationally

Documents Prepared Before Shipment

• Commercial Invoice/Consular Invoice
• Export License
• Shipper’s Export Declaration (SED)
• Export Packing List
• Certificate of Origin
• Insurance Certificate
• Inspection Certificate

Documents Used During the Inland Movement of the Goods

• Shipper’s Instructions
• Inland Bill of Lading
• Delivery Instructions
• Dock Receipts
• Bill of Lading/Air Waybill
• Packaging
• Temporary Export Licenses and ATA Carnets

Strategic Alliances and Foreign Investment Opportunities

If your company is interested in delving further into the international trade arena, licensing, joint ventures and offshore operations might be explored. While direct exporting may be a profitable method of market entry for some businesses, licensing your company’s manufacturing rights to a foreign company or setting up a foreign manufacturing joint venture may be viable alternatives.

In comparison to exporting, setting up offshore manufacturing operations may be a more economical way of doing business. Firms choosing to set up operations in different countries should check for local incentives. Government agencies usually will assist foreign businesses to set up operations and will provide a wide range of grants and taxation incentives, both for the corporation and its expatriate employees.

Source

Creative Commons attribution: This entry includes content from the following Business.gov source: SBA.gov Guide to Exporting

See also

• SmallBusiness.com Trade Hub